2013 (2) TMI 635 - AT - Service Tax

Whether the advances giving raise to tax demand has really suffered tax in subsequent period and disclosed in service tax returns filed - Held that - From various documents enclosed to paper book it exhibits that the appellant has made effort to satisfy the authority below making reconciliation of the advance received with adjustment thereof towards taxable service received in future. But that does not pin point in which year and under which head that was adjusted filing returns under Finance Act 1994. What that is required is that both sides should make effort to reconcile with reference to receipt and disclosure in the returns of relevant year to reach to a rational conclusion in respect of the amounts of the show cause notice. If any of the part of the advance attributable to taxable service and that did not form part of returns filed subsequently that amount shall be brought to tax without escapement. Law does not permit postponement of liability because of specific provision under section 67(3) of the Finance Act - remand the matter for proper reconciliation to serve interest of justice

Summary

Issues: Service tax demand based on advance payments not accounted for in service tax returns.

In this judgment by the Appellate Tribunal CESTAT, New Delhi, the main issue revolves around a service tax demand of Rs. 83,48,183/- based on advance payments received by the assessee for fabrication, erection, and commissioning services. The Revenue contends that the assessee did not pay service tax on these advance payments as required by Section 67 of the Finance Act, 1994. The appellant argues that the advances were adjusted against bills for taxable services provided, thus already subjected to tax. However, the Revenue insists on proper reconciliation to ensure that the tax on these advances was indeed paid in subsequent periods and disclosed in service tax returns. The Tribunal emphasizes the importance of reconciling the advance payments with the taxable services provided and disclosed in the relevant tax returns to prevent any tax evasion. The judgment highlights the significance of not allowing the escape of taxation on amounts received in advance for taxable services, in accordance with Section 67(3) of the Finance Act, 1994.

The Tribunal notes that the appellant has made efforts to reconcile the advance payments with the taxable services provided but lacks clarity on the specific years and heads under which these adjustments were made in the tax returns. The Tribunal directs both parties to diligently reconcile the advance payments with the taxable services provided and disclosed in the relevant tax returns to arrive at a fair conclusion regarding the tax liability on the amounts mentioned in the show cause notice. It emphasizes that any amount attributable to taxable services received in advance but not accounted for in subsequent tax returns should be taxed without evasion, as per the provisions of the Finance Act, 1994. The judgment underscores that the law does not permit the postponement of tax liability, especially concerning advance payments for taxable services, as stipulated in Section 67(3) of the Finance Act, 1994.

The Tribunal decides to remand the matter to the adjudicating authority for proper reconciliation and a fair decision to serve the interest of justice. It directs the authority to expedite the hearing and thoroughly examine the reconciliation statement provided by the appellant. The Tribunal stresses that both parties should have a fair opportunity to present their arguments and that any amount not previously taxed by the Revenue should be appropriately taxed in the readjudication proceedings. The judgment concludes by keeping the matter open for further arguments on facts and law, ensuring a just resolution of the service tax demand issue based on advance payments not accounted for in the service tax returns.